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Funding Iraqi Reconstruction
Peter Saba
Acting Chief Operating Officer and General Counsel
Iraqi Reconstruction Conference
Washington, DC, July 1, 2003, 11:30 a.m.
As prepared for delivery
Good morning. It's a pleasure to represent the Export-Import Bank of the United States at this conference on Iraqi reconstruction.
As President Bush said on May 2nd: "We're rebuilding Iraq, where the dictator Saddam Hussein built palaces for himself instead of hospitals and schools. And we will stand with the new leaders of Iraq as they establish a government of, by and for the Iraqi people. The transition from dictatorship to democracy is hard, and will take time -- but it is worth every effort. Our coalition will stay until our work is done."
At Ex-Im Bank, we are working with our partners throughout the U.S. government - at the Office of Reconstruction and Humanitarian Assistance, the State and Treasury Departments, USAID, OPIC, and many other agencies - to facilitate Iraq's reconstruction in a way that will most benefit the country's 23 million people.
For those of you who don't know us, Ex-Im Bank is our nation's official export credit agency. We support U.S. exports principally to emerging markets where private export financing is unavailable due to political or commercial risk.
We provide export credit insurance, loan guarantees, working capital guarantees, and loans to support approximately 2,500 U.S. export transactions a year. Last year, our authorizations supported about $13 billion in U.S. exports.
Ex-Im Bank supports export of all sizes and types, from aircraft and power projects to medical equipment and school textbooks, and nearly 90 percent of the transactions that we support involve U.S. small businesses.
While our mandate is to support U.S. exports and U.S. jobs, U.S. exports and trade in general are powerful tools of economic development, improving the living standards of people in countries throughout the world.
Re-establishing Iraq's trade with its neighbors and the world is a key element in rebuilding Iraq's economy, and opening Ex-Im Bank' programs in Iraq will further this objective while fulfilling our mission to support U.S. exports.
At Ex-Im Bank, we have established an internal task force that is working to address the legal and credit issues relating to our ability to offer trade financing in Iraq. And, as I mentioned, we are coordinating our efforts in this regard with other federal agencies and the U.S. exporter community.
With the executive actions taken by President Bush and the Department of the Treasury, and the lifting of U.N. sanctions, Ex-Im Bank has determined that it is no longer legally prohibited from supporting U.S. exports to Iraq.
However, Ex-Im Bank is still subject to the standard requirements set forth in our Charter, including that every credit we provide must have a reasonable assurance of repayment.
While the Bank is still closed for routine trade finance transactions, it is prepared to immediately start processing applications for exports to Iraq that involve buyers or letters of credit from banks located in third countries such as Turkey, Jordan, Egypt, Kuwait, Saudi Arabia and other Gulf countries.
Ex-Im Bank is also ready to consider applications under our working capital guarantee program to support subcontractors, particularly small businesses, involved in Iraqi rebuilding under USAID contracts. Under this approach, Ex-Im Bank can provide working capital to finance pre-export activities of sub-contractors operating under U.S. government-funded reconstruction contracts. It should be noted that these transactions would have to satisfy Ex-Im Bank's standard requirements, including
"additionally."
We are also coordinating with officials who are evaluating options to establish an Iraqi Trade Bank or other trade financing facility, as articulated by Ambassador Paul Bremer. Such an institution would jump-start trade by making it possible to establish letters of credit for buyers in Iraq. Over the long term, it also could spur the development of a modern trade finance system in Iraq. Specifically, we are examining how Ex-Im Bank's letter of credit insurance program could be made available in the event that insurance from Ex-Im Bank or other export credit agencies will be necessary in order to get a trade credit facility up and running in Iraq.
Ex-Im Bank is also reviewing various proposals that have been made to utilize a securitization or similar structure to maximize current funding of infrastructure reconstruction from future increased oil production. Securitizing or otherwise monetizing the future oil revenues would maximize the ability to finance infrastructure projects in Iraq today, while providing opportunities for exports from the U.S. and elsewhere. We believe that such an approach has merit - but there are a number of issues and questions that need to be addressed.
In conclusion, we are examining as many avenues as are legally and practically available to support the Bush Administration's efforts to rebuild Iraq while fulfilling the Bank's mission of supporting U.S. exports. We want to do this in ways that are as expeditious and beneficial to the Iraqi people as possible.
Whatever mechanisms are established should adhere to the Administration's clear principles that Iraq's oil resources belong to the Iraqi people and shall be used in a transparent manner for purposes benefiting the people of Iraq, including humanitarian assistance and reconstruction and repair of Iraq's infrastructure. Ex-Im Bank can assist in these efforts while fulfilling its mission to support U.S. exports and the U.S. jobs they represent.
Given that this is a very fluid and evolving situation, I'm sure that we at Ex-Im Bank will have more to report soon, so please stay tuned.
Thank you.
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